- USD / JPY regains positive traction on Wednesday amid renewed buying interest in the USD.
- A modest rally in US bond yields benefits the USD and supports the pair’s upward move.
- Investors await the release of the US CPI report for further momentum.
The pair USD/JPY remains higher during the early part of the European session on Wednesday, staying close to daily highs around the region 108.70-80.
Following the pullback the day before, from the highest level since June 2020, the pair has attracted some buying at lower levels on Wednesday, backed by renewed buying interest around the US dollar. Investors remain hopeful that the successful launch of the COVID-19 vaccine and massive US fiscal spending will fuel the US economic recovery.This, in turn, has helped reignite demand for the USD and has allowed the USD / JPY to regain traction.
Apart of this, a modest rally in US Treasury yields has provided an additional boost to the USD and has further inspired the pair’s bulls. The optimistic US economic outlook has fueled the speculation about a possible rebound in US inflation. This has raised further doubts that the Fed will keep interest rates ultra-low for a longer period, which has continued to cause some selling in the US bond market.
Therefore, the key focus of attention on Wednesday will remain on the latest US consumer inflation figures, to be released at the start of the American session. The data, along with a critical 10-year bond auction in the US., will now play a key role in influencing USD price dynamics ahead of the FOMC’s monetary policy meeting next week. Investors will follow the signals of the broader market risk sentiment to seize some short-term opportunities.
From a technical perspective, the previous day’s drop could still be classified as a corrective pullback. A fresh rally on Wednesday favors the bulls and supports the prospects for additional gains. With that said, the overbought RSI on the daily chart warrants some caution before positioning for any further bullish movement.
USD / JPY technical levels
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